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Follow the money

Despite a topsy-turvy first-quarter, there were decent inflows in to the equity and bond markets.  On the equity side, funds saw total inflows of about $73 billion. 

About $68 billion flowed in to open-end funds and just about $4.5 billion went in to Exchange Traded Funds (ETF).

Equity income products have fallen in and out of favor with investors since this time last year but seem to be seen in a positive light again. 

“With the market gyrations we’ve seen recently in the tech and biotech space, we’re starting to see some flows come back in, so this could be back on again in Q2,” said Bob Jenkins, global head of research at Lipper Thompson Reuters.

Bond funds didn’t quite match to equities, with $44 billion coming in to the space.

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Within the bond industry, a big winner was in the alternative credit focus strategy.  This space has hedge-like strategies embedded in to the funds in terms of market downside and currency -hedging.  It allows managers to be opportunistic and to find income wherever it may be around the world and up and down the capital spectrum, according to Jenkins. 

Loan participation funds were another bright spot in fixed income.  An additional $7 billion flowed in to the space, continuing a long positive trend.   It’s grown to $140 billion from $20 billion since 2009 Jenkins said. 

Yet, he urges caution when investing in the loan participation fund space.   “Potential changes to this story may take place if a steepening yield curve impacts loan portfolios down the road.”

The liquid alternative sector is yet another bright area.  “We have seen great growth here and strongly feel this is a category that will continue to grow into the future although we do expect growing pains, Jenkins said.  He added, “We think the future is quite bright for this space.”

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